Quebec Premier Philippe Couillard, right, is handed a copy of the provincial budget by Finance Minister Carlos Leitao, Wednesday, June 4, 2014 at his office in Quebec City. The budget will be presented at the National Assembly later in the afternoon. THE CANADIAN PRESS/Jacques Boissinot

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QUEBEC — Finance Minister Carlos Leitão, in his first budget Wednesday, equalized the tax levy on beer and wine consumed at home and in bars, raised the cigarette tax by $4 a carton and increased parents’ contribution for subsidized daycare places by 30 cents to $7.30 a day.

This budget, aimed at rebuilding the Quebec economy on “two strong pillars” — a growing economy and “sound balanced public finances,” promised no new taxes “apart from measures with which most Quebecers likely agree,” Leitão said.

The change in the beer and wine taxes, a long-standing demand of bar and restaurant owners who now will pay less with the uniform tax, will add $36 million to Quebec’s coffers this year. The higher cigarette tax, will bring in $90 million in 2014-15.

The previous Parti Québécois government proposed raising the daycare charge to $8 this September and $9 a year later, a proposal rejected by Liberal leader Philippe Couillard.

During the election campaign, Couillard said the hike would mean parents with two children in daycare would pay $1,000 a year more.

This is Quebec’s second budget this year. The PQ budget, presented in February, was not adopted.

And while the Liberals campaigned on job creation, criticizing the PQ record, Marceau said this budget confirms his government created 47,800 jobs in 2013, while Leitão is only promising 31,300 jobs in 2014 and 46,300 in 2015.

In his budget, Leitão said the $2.5-billion deficit, announced by Marceau for 2013-14, was in fact a $3.1-billion shortfall and Marceau’s projected deficit of $1.75-billion this year, will also be $600 million higher, at $2.35 billion.

Quebec’s total spending in the 2014-15 fiscal year, which began April 1, including provincial programs, health and education spending, will total $97.4 billion, with $10.8 billion in interest payments.

“Spending continues to grow faster than revenue, which is the very definition of a structural deficit,” the minister said.

Two experts commissioned by the Liberal government, fiscal specialist Luc Godbout and economist Claude Montmarquette, as well as acting auditor general Michel Samson, have indicated the needs of Quebec’s public sector are about $4 billion higher than its resources.

Samson found government departments asked for a 6.7-per-cent budget increase this year.

Marceau proposed in his budget a two-per-cent cap on spending increases.

The Leitão budget calls for a 1.8-per-cent spending cap this year and a 0.7-per-cent ceiling in 2015-16.

Like Marceau, Leitão pegged the increase in health-care spending at three per cent.

Michèle Pelletier, of the Association québécoise d’établissements de santé et de services sociaux, representing Quebec’s hospitals and health network, said the system needs at least a 4.4-per-cent increase.

“It will certainly have an impact on services,” Pelletier said, adding that the $150-million increase for home care, that was in the Marceau budget, is absent from Leitão’s.

To bring down Quebec’s spending levels and balance the provincial budget by 2015-16, Leitão announced the creation of a taxation review committee, chaired by Godbout.

As well, an Ongoing Program Review Committee, will assess Quebec’s spending programs to redirect resources “where the needs are greatest.”

In one of its first acts, the Couillard government announced a public-sector hiring freeze, now extended until 2015-16, called for productivity gains, representing two-per-cent of payroll, and imposed a three-per-cent reduction in government spending.

For 2014-15, there will be more spending cuts, a review of some programs, delays in spending commitments and changes in operating practices.

Government agencies will also be asked to cut spending by $438 million in 2014-15 and $172 million in 2015-16.

Leitão took a first step in reining in spending, announcing a 20-per-cent cut in tax credits for business and suspending measures proposed by the short-lived PQ government, for $35.5 million in savings this year, rising to $371.1 million in 2016-17.

Martine Hébert, of the Canadian Federation of Independent Business, said Quebec has 160 tax credit and subsidy programs for businesses along with the most red tape and highest taxes for small businesses in Canada.

“Are all these programs efficient?” she asked.

Leitão announced the corporate income tax on small and medium-size businesses in manufacturing would be lowered to six per cent from eight per cent Thursday and to four per cent next April 1.

Hébert called this is “a good first step.”

Leitão said the Liberal government wants more private investment, “focusing on small and medium-size businesses.” Small manufacturers in remote regions, like the Îles-de-la-Madeleine, will be given added tax credits for transportation to their markets.

The second of the five “thrusts” of the Liberal plan is a maritime strategy, focused on water, rail and truck transport, with the goal of making the St. Lawrence River the North American gateway for trade with Europe.

The third Liberal thrust calls for reviving the Plan Nord, announced by the Charest government, to encourage mining projects in northern Quebec.

A fourth thrust will be in natural resource development, specifically forestry and mining projects beyond the Plan Nord perimeter. The province also wants to develop oil and natural gas plays in Quebec, and is ready to invest up to $1 billion for equity stakes in gas and oil companies.

Hydro-Québec will use its comparative advantage of lower electricity prices to attract industrial investments and the utility could invest in transit electrification projects.

It will also build a fourth transmission line from James Bay, at a cost of $1.1 billion, creating 1,000 jobs.

For the fifth thrust, Leitão pledged to continue Quebec’s 2014-2024 infrastructure plan to invest $90.3 billion over 10 years. But the precarious state of Quebec’s public finances means an additional $15 billion in infrastructure spending, shelved by the PQ, will not be revived.

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